Tesla: No Robo-Taxis But Still Worth 2/3 Of Alphabet
Deep Value, Foreign Companies, Nano-cap, Long Only
Seeking Alpha Analyst Since 2012
As a mathematician (Ph.D.) I use 7 quantitative strategies with statistically extremely high returns. I select these cheap companies with software comparing thousands of global stocks on value metrics, liquidity, quality metrics, and momentum. I focus on global nanocaps and net-nets. Check Turning Rough Stones: turningroughstones.substack.com
China story
A couple of days ago a very negative article about Tesla Shanghai was published in Chinese and English. Allegedly Tesla (TSLA) threatened the author or publisher with a lawsuit. As I wrote in my previous blog the publisher resisted and said it could write more such articles. Indeed both the Chinese and the English article is still online.
Market cap
See this tweet. Twitter user and Seeking Alpha author Keubiko argues Tesla has now 2/3 of the market cap of Alphabet (GOOGL). Google is a growing wide moat business generating enormous profits. That is so unlike Tesla whose profits depend on regulatory credits and whose car sales suffers from increasing competition. Furthermore Alphabet has a level 4 self-driving product while Tesla only has level 2. Moreover using Tesla's self driving features is very dangerous because of the lack of recommended driver supervision.
His question is: when will this clown show end? We do not know. The shares still have great momentum. However it does not have the best momentum and the stock price is highly volatile. I compute information discreteness of -0.15 and a weekly 3-year volatility of 0.09. The best momentum stocks have lower information discreteness and lower stock price volatility. For example European Esker SA (ticker ALESK in Paris) with information discreteness of -0.226 and volatility 0.040. See my other blog. So if you like momentum better swap your Tesla position for positions discussed in this other blog.
Other news
Teslas remain dangerous. See these tweets about a Tesla model S recently erupting like a flamethrower in the US, covered by the Washington Post.
In the first half of December 2020 an accident occurred in Korea with one dead. See also here. It seems it was caused by unintended sudden acceleration but the car also caught fire. That accident is being investigated by the Korean authorities. Korean authorities will not let Tesla get away with this. See also this comment on Twitter.
Here is what seems to be another unintended sudden acceleration accident in Hanzhou, PRC. I do not know when it happened but I think it happened in the last days of December 2020.
The model 3 might be a great car, as long as you do not need to depend on Tesla service for fixing the lights. See here.
A couple of days ago Tesla said it would not cut prices in China. But now new price cuts have been reported. See here. It is not certain whether the changes will result in lower average sales prices for Teslas made in China. However now the long range model 3 has been removed Chinese buyers can chose between the performance version, the SR+ and maybe also for the model Y. If too many people chose for the SR+ the average sales price will decrease.
Bottom line
Apart from defects increasing competition remains a problem for Tesla. I expect increasing competition to result in lower sales starting in 2021. The stock price will react much on lower sales. From Q2 2020 the company has done everything it could to prevent lower sales. However in 2021 the pressure from competition will cause it inevitable for Tesla to deliver fewer cars.
While other insiders are regularly selling Musk and Larry Ellison have not sold their shares. I suppose Ellison does not need to sell any shares but Musk has to reduce his leverage at some time. Recently he flew to Hawaii, where Ellison lives. Was that to discuss new insider sales? What kind of effect would a very large insider sale have on the stock price?
My opinion on the stock is still: strong sell.
Global Deep Value Stocks is a long only newsletter. I do not discuss stocks like Tesla in Global Deep Value Stocks. See here and here for examples of what I do at Global Deep Value Stocks. For more information you can take a free trial here or send me a DM.
Analyst's Disclosure: I am/we are short TSLA.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.